Exchange-traded bonds for medium-sized businesses

It is no secret that in recent years there has been an interest of individuals in investing, the number of open investment accounts is growing, and the state is supporting enterprises in their desire to issue bonds. While rates on bank deposits tend to zero, the Moscow Exchange index is breaking records.

Against this background, enterprises are increasingly thinking about attracting alternative financing and issuing bonds. The rate on bonds is usually higher, but in return, you can forget about the pledge of property and the personal guarantee of business owners.

There is a general list of requirements for potential bond issuers:

The minimum amount of business revenue is 120 million rubles;

The minimum volume of issue is 50 million rubles;

Net debt / EBIT (operating income) less than 3x or issue volume not more than ½ of revenue or balance sheet;

IFRS reporting is desirable;

Average revenue growth rate (CAGR) of at least 10% over the last 3 years.

As you can see, bonds are not always about big business. Including medium-sized businesses, the state motivates them to resort to this method of financing. In particular, subsidies are provided for SMEs (Small and Medium Enterprises):

subsidizing coupon income – 70% of the coupon rate, but not more than 2/3 of the key rate of the Bank of Russia;

subsidizing the cost of issuing bonds – no more than 1.5 million rubles.

However, special requirements are imposed on the legal structure of the business. The exchange and investors will not accept a “bank report”. What to look for if you want to try your hand at business in the field of bond issuance:

There should be clear legal grounds on which it is possible to combine several legal entities whose performance is taken into account for the issue of bonds. For example, a business operates within several LLCs, the total external revenue of which is 10 billion rubles. To declare the issue volume of 5 billion (1/2 of the proceeds), it is necessary to consolidate the proceeds according to the reporting. If companies are registered to distant relatives or “good guys”, this will not work. The same requirement applies to business assets – if we want to demonstrate property stability, then ownership of property should be clear. It is inappropriate and unnecessary to combine all companies into one, and sometimes and impossible according to the requirements of the law, so often we are talking about increasing the transparency of the ownership structure.

The life of the business is at least 3 years. There is no single answer, it takes into account the period of existence of the business (one of the legal entities of the group of companies) or the period of registration of the issuer itself. There are cases when a separate company is created to issue bonds, which, on understandable grounds, combines the indicators of the entire group of companies. But the requirements of the Exchange and the Central Bank of the Russian Federation are constantly changing. Therefore, the final answer at a specific point in time will be given by the Release Organizer. (A company that fully accompanies the issue of bonds: advises the issuer on the conditions for raising funds, represents interests in a dialogue with the Exchange, communicates with investors, etc.)

Openness of business and its leader. The issue of bonds involves not only formal reports, but also regular “communication” of business with investors, disclosure of plans and prospects, explanation of risks and temporary difficulties.

Intellectual property rights, significant assets must be secured and formalized on understandable grounds. For example, a potential investor is unlikely to like a company that operates under a trademark registered in the name of an individual entrepreneur. Obviously, this carries the risk of stopping the company’s activities and/or distorting its financial performance. Investing in such a company would be risky.

The official profitability of the business. After all, potential investors need to demonstrate the real profit of the company, and not a tablet in Excel.

Taxes. In the above circumstances, according to the laws of physics, they will strive for the recommended values ​​of the Federal Tax Service, which are regularly updated in the Transparent Business service.

So simple and so difficult at the same time.

Let’s add one more point to this – this is an opportunity to quickly and at minimal cost come from the current model to such a concise version, when the decision to issue bonds is made.

Developing an optimal Roadmap as part of business structuring, which will take into account all the nuances and limitations of operating activities, also takes time. Therefore, no matter how trite it may sound, it is necessary to prepare for the issue of bonds in advance.